Transcripts For CSPAN2 Senate Hearing On Tax Code Impact On Domestic Manufacturing 20210317

jobs crisis brought on by covid-19. today the committee meets to discuss another challenge the pandemic exposed, the fragility of our supply chains and the need to boost manufacturing in america. when it exploded, factories around the globe shut down and supply chains were cut. most americans would recognize the fact of the supply chain crisis as something that i would call a toilet paper problem, yet it seemed like the supply ran out in the blink of an eye and overnight nobody could get their hands on a package of toilet paper. some raised prices, others restricted the marketplace to compensate for the shortages. the shelves were still empty, and americans were facing a panic. household paper products are one thing. the reality is huge and vitally important parts of the economy are suffering from their own version of the toilet paper problem. for example, over the last year, the concerns of the supply of batteries, medicine and minerals that are used in electronics are still shortages of protective equipment the doctors and nurses need and producers including one in oregon that had been making high-quality respirators and ppe but it's still a market dominated by producers in china. the supply chain crisis set off the most alarm bells, particularly as it related to semi conductors. they are obviously an important medical device, appliances, computers, technologies you name it. americans don't roll out of bed in the morning without flipping a switch or checking some device. disruptions of a single producer of semi conductors caused major headaches for manufacturers across the country as well as consumers. factories here in the united states as a result of the shortage the shock waves and the economy continue to ripple out. it is a recipe for trouble when one single pandemic natural disaster or terrorist attack can sever supply chains, hobble the economy, threaten jobs as well as put at risk our national security. i will close by saying we do have bipartisan interest now in addressing this issue building on our domestic manufacturing to bolster the supply of semi conductors and other critical components and products. the president ordered a comprehensive review of supply chains, several different areas of our economy and national defense. the biden administration made clear that nothing is off the table when it comes to strengthening our supply chain and our economy. in addition to america's national and economic security, fundamentally, and we will come back to this again and again, this is about high skill and high wage jobs for american workers. a lot of communities across the country have endured steady declines in manufacturing in the peak decades. the manufacturing economy never fully recovered the great recession before the pandemic hit. so, we have got a big opportunity to turn this around. this is an area where my home state of oregon is an national leader. intel is one of our biggest employers. our state is known for innovation out of silicon valley. oregonians know that investments in and advanced manufacturing but learnings the most high skilled, high wage jobs that will be the start for the committee. those are exactly the kind of jobs we want more of. the committee has a host of economic tools to help shore up the domestic manufacturing for example, the senator working on the advanced manufacturing credit. senator warner, cornyn and others on the issue of chips in my view is going to be critically important to look at the changes to the 2017 trump tax law which in fact created a disincentive for the research development, fixing strong and reliable incentives is going to be key because the united states must outcompete china and other countries, and you can't do it with short-term legislation and uncertainty. i look forward to working with all the members on the committee on both sides of the aisle because this is a premier economic challenge and job creation opportunity. i'm happy we are joined by a panel of witnesses who can examine the issue from just about every angle. we will now turn to the senator and we will have senator brown introduce mr. black. our friend, our neighbor, senator crapo. >> mr. chairman thank you and your staff for collaborating with us on this bipartisan hearing. there are many areas within the finance committee's jurisdiction that are right for the bipartisan support of this congress and i look forward to working with you on those through regular order. today's hearing will focus on the role of tax incentives for domestic manufacturing. the manufacturing sector is critical to the u.s. economy. in 2019, the manufacturing sector accounted for 11% of our gdp. the united states has experienced a net loss of manufacturing plants in every year from 1998 through 2018. the decline in domestic manufacturing and jobs may be attributable to a number of factors including increased automation and productivity, labor costs and taxes. taxes can play a significant role in a company's site selection process. prior to the tax cuts and jobs act of 2017, the united states had one of the highest corporate income tax rates among the developed countries. also, the u.s. confronted pressures for domestic firms to invert or acquire foreign companies bringing to the u.s. headquarters jobs going abroad. today as a result of this, the united states now has a flat 21% corporate tax income rate. pressures for these acquisitions abated yet despite that rate, the u.s. still holds the 11th highest corporate tax rate among these countries. the statutory corporate income tax rate is critical to the u.s. competitiveness in the global markets. another key aspect to the competitiveness is capital investment. the internal revenue code has a number of tax incentives for capital investment which when paired with a corporate tax rate is essential to promote domestic manufacturing. this is an area of bipartisan interest and i welcome the opportunity to work with the chair man on this. for example, last year, senators cornyn and warner introduced s3993, the creating helpful incentives to produce semi conductors for america act known as the ship act. which would create a 40% refundable investment tax credit for qualified semi conductor equipment or any qualified manufacturing facility investment expenditures. this bill had seven republicans and five democrats as cosponsors. another example just this month senators mansion, stabenow and daynes introduced s622, the creating helpful incentives to help produce semi conductors for america act that offers an 8 billion-dollar increase to the section 48c advanced manufacturing tax credit available to manufacturers and other industrial users to retool, expand or build new facilities that make or recycle energy related products. intel and other american semi conductor manufacturers are operating at an increasingly competitive and sometimes unscrupulous market. only a couple of years ago the state owned companies stole the trade secrets from micron to gain an advantage of leading producers, sought after technologies. helping u.s. companies strengthen their supply chains to better protect these critical technologies is vital to safeguarding the national security and the health of our economy. chairman wyden, we have a great panel here representing a comprehensive range of perspectives from the business community, academia as well as labor. i look forward to hearing their thoughts as we consider various tax proposals that can help address the global semi conductor shortage, supply chain issues and encourage domestic manufacturing activities. thank you mr. chair. >> this is obviously a premier issue for bringing both sides together creating more american jobs and we thank you for it. senator brown we were going to have an introduction to the constituent and then we will start the witnesses with george davis. senator brown. >> thank you mr. chairman, and also, senator crapo, thank you working not just on the banking committee but also finance. i'm thrilled you're doing this s hearing and it's important, it's with my long-time friend, the director of the united steelworkers district and member of the international executive, doddy is from hannibal ohio and a member some 40 years working in the plant for 42 years in ohio before it closed and he knows what it's like to lose good job with good benefits to unfair foreign competition and a trade policy and tax policy that putting it bluntly sold out american workers. he knows what those job losses do to an entire community in a place like this. dottie never gave up, he spent his life fighting for the dignity of work in ohio and across the country serving the members of local 5724 in many roles including two terms as the chair, and together we worked to make progress to keep and build the playing field for the workers. the director of usw district one was instrumental in establishing the precollege benefit and donnie has been a member of the afl-cio since 2006. he became the chairman of the legislation in 2019 and we are lucky to have him here today. i am proud and lucky to have him as a constituent. >> welcome. >> thank you, senator. we look forward to working with you on these issues. let me now give a background on the other witnesses. the first will be mr. george davis, executive vice president and chief financial officer at intel. the next, jonathan jennings vice president of purchasing and supplier of technical assistance at the ford motor company and the third witness will be president and ceo of the national association of manufacturers and the fourth witness, doctor michelle, the howard w johnson professor at the school of management at mit and the final witness was introduced by our friend, senator brown with the united steelworkers district one. we will begin with you, mr. davis. you are on mute. >> how about now. >> perfect. too many buttons apparently. thank you for the opportunity to address the committee today. the semi conductor technology and the domestic manufacturing operations provide a critical foundation for u.s. economic and national security. more than 50 years ago, intel invented the world's first commercial microprocessor. this fueled job growth and development of new technologies with major economic benefits. today, intel remains the only american semi conductor with designs and manufacturing the most advanced logic chips and is the only company that has built leading edge logic in the u.s. in the past five years. i am proud that the majority of our manufacturing is conducted in oregon, arizona and new mexico and that the majority of the intellectual property still resides here at home. unfortunately, u.s. leadership in the semi conducting manufacturing is at risk. global demand for the semi conductors has increased dramatically and is projected to grow 5% annually until 2030. however, only 12% of global semi conducting manufacturing is in the u.s. and just 9% is from american companies. currently, 80% of the worlds semi conducting manufacturing is concentrated in asia. u.s. manufacturing must regain its competitiveness. president biden's executive order reinforces the urgency of the funding of the bipartisanship for america act but led by senators cornyn and warner. there legislation recognizes the importance of using federal grants to support american workers and strengthen domestic semi conductor industry. congress must now work to fully fund the grant program and an act its proposed investment tax credit. an investment tax credit would encourage long-term domestic semi conducting manufacturing. a single advanced logic manufacturing facility that costs tens of billions of dollars to build and operate. every advancement and chip design requires retooling and reinvesting in new equipment. over the last decade, the average rate of the manufacturing has grown five times faster overseas than in the u.s. due to robust incentive programs offered by other countries. in fact, u.s. companies face up to a 40% cost disadvantage compared to the asian competitors due largely to the government incentives. investment in research and development is critical to advanced manufacturing. as president biden acknowledged in his executive order, or entity is essential to sustaining leadership in the development of critical goods and materials. however, without congressional action, 67 years of pro r&d growth policy is about to be reversed. starting next year, businesses will be required to amortize their r&d expenses over several years. removing this deduction will make the u.s. virtually the only developed country in the world with this policy. this change will significantly increase the cost in the u.s. we applaud the bipartisan work of senators young, cortes musto, portman whose bill the american innovation jobs act would prevent this regressive policy from taking place. right now, the u.s. is uncompetitive and attracting new semi conductor investments. semi conductors are the building blocks of technology and must continually invest to enable chips to run faster and use less power. this is why the intel reinvests on average nearly 20% of its revenue to the rmd for about $13 billion annually. the act along with the ability to fully conduct the r&d expenses will enable american companies to better compete with heavily subsidized foreign companies. .. >> the opportunity to speak to you today. i'm honored to be represented the us auto industry accounting 18 million us jobs. manufacturers and suppliers to make up the complex system of $953 billion into the us economy each year. is especially meaningful to be testifying a both of my home state senators. 53000 employees more than 330,000 partners are so fortunate to have you championing auto manufacturing my career started in 1883 in cleveland ohio i worked on the world for forward focusing on developing will tend global supply chain. speaking to you today as vice president global supplier technical assistance to purchase more than $30 billion of goods and services for more than 5000 us suppliers in 40162019. we see ourselves as america's automaker and those in the us more than any other automaker and with that business environment needed to continue the winning strategy we support communities and families across the country 117 years when america needed us to step up we have responded from world war ii to the global pandemic we been on the frontlines starting last year to produce masks and reusable counts task test collection and facemasks and ventilators. the ability to quickly shift manufacturing vehicles to ppe was largely because of the unique manufacturing footprint to make respirators and ventilators for those in the us plants and warehouses. i study how powerful response industry can be to build a new generation of vehicles are easily attainable bringing us to today. the global industry driving a revolution to reduce the carbon footprint to change how auto manufacturers more than half of the world's vehicles will be electric right now china is home to 73 percent of the worldwide capacity for lithium-ion batteries the us fell far behind in second place. this is simply unacceptable. the next few years the growth the manufacturing with faster in asia than the us with global battery manufacturing. the semi conductor shortage throughout the industry every auto company manufacturing in the us has had production. to suspend production in louisville in chicago the semi conductor solution there are dangerous parallels to the electric vehicle batteries that are sourced and developed in short we must collectively do more to protect future manufacturing in america. committing $22 billion to developing new generation electric vehicles to reach carbon neutrality in 2050 last are we spent more than $5 million of research and development in the us representing 15000 engineers and software developers test labs and equipment reflected in the safety and connected vehicle technology with the best-selling from the kansas city plant all electric from the f1 50 pickup built in dearborn. the future is electric and it must include america. with the congress and the administration to support market-based consumer and manufacturing incentives with new technology and supply chain security. we appreciate senator stevan hours leadership not just as a champion for expanding the electric vehicle consumer tax credit but the recent introduction of american jobs of energy manufacturing act we embrace the proposal providing 10 percent tax credit for us manufacturing jobs and support increasing existing r&d incentives for electric battery development and continue immediate expensing of r&d public and private support of such vacation will ensure america cannot only compete as a vehicle on - - compete only but when does europe and china are already moving forward with robust electric vehicles strategies and policies. we stand ready to work with congress and administration to not only deliver world-class electric vehicles but with the supply chain and infrastructure to economic and transportation stability and security for america. thank you. >> thank you very much mr. jennings. >> good morning and mr. chairman. i'm joining you virtually because of the pandemic this country has endured for more than a year. but this pandemic is more than a story of economic hardship and painful loss but also communities and companies rising to the challenge. america's manufacturing workers mobilized in ways reminiscent of their resolve during world war ii the manufacturer's became the arsenal of democracy. accompanies joining me today are part of this effort. forty heard from ford on how they we made shop floors to make ventilators and face shields and intel accelerated access to technology to combat this pandemic. iconic global brands to family-owned shops and manufacturers answering the call. today, one year after health restrictions began the light at the end of the tunnel is growing brighter by the second thanks to innovation of pharmaceutical manufacturers and their direct were combined with the previous demonstrations operation warp speed and this congress and this administration's focus on vaccine distribution is now saving about 2 million american lives every single day. manufacturing workers achievements are all the more impressive when you consider the disruptions they had to overcome. the pandemic exposed and exacerbated serious supply chain issues we must now address as we work to build the next post pandemic world. in the spring of 2020 the national association of manufacturers had a plan for strength during the supply chain and it had the opportunity to discuss it directly with some of you. our goal is your goal to ensure the next dollar invested in manufacturing is invested right here in america. the plan is comprehensive taxes to workforce in the central premise is that incentives, not punitive measures will allow us to achieve our shared goal. let me call out three key recommendations. number one, you must recognize the importance of predictability and stability in the tax code. tax reform made manufacturers more competitive driving wage growth and productivity. let's not undo that progress. number two manufacturers in america can only remain at the cutting edge if our tax code supports innovation. you already heard this from two other panelist. unfortunately, it will do just the opposite starting next year and that change to the tax credit will make it more expensive to perform research and development to cost america its innovative edge. number three let's recollect - - recognize the simple truth policies that are successful to require significant capital expenditures by the small and medium-size firms that are truly the backbone of the domestic supply chain. but other living changes would make those expenditures difficult. more stringent limitations in the phaseout of immediate expenses would take effect in the years ahead. it's not revised to hit manufacturing here at home ultimately ensuring the next manufacturing dollar is invested right here in america requires looking at the entire business climate that this congress has to address other pressing questions as well. will tax rates for businesses of all sizes remain competitive or become more competitive so we can keep attracting investment? with a regulatory system provide certainty and clarity? will healthcare become more affordable without compromising free market principles? will the nation make both investments of infrastructure that are long overdue? will energy be abundant in affordable and reliable? will export opportunities increase while the existing trade agreements will protect american workers? will be achieve comprehensive immigration reform to ensure those hidden in the shadows brought here is children can become permanent productive members of society. if the answer to those questions is yes, if we tackle the fundamental issues, than i am certain this next world we are building in the aftermath of the pandemic will be built by american workers in american factories destroying american leadership in the world. thank you mr. chairman and i look forward to your questions speak the next witness. >> thank you. good morning. chairman, ranking member and distinguish members of the committee, thank you for inviting me to participate in this hearing. it's an honor to be here. three points i would like to make that i look forward to any questions you may have. first, maintaining a competitive separate statutory income tax rate as an policy objective is a ranking member said in opening remarks prior to the tax cuts of 2017 us had a 35 percent corporate income tax rate one of the highest rates in the world. that high rate along with our international regime we had prior lead to many negative economic outcomes. for example there was incentives to move profits to foreign locations and to retain holdings in foreign subsidiaries. in particular for this hearing some cases our prior tax system and incentives to manufacture outside of the us. currently the statutory income tax rate is 21 percent. according to data our rate including state and local income taxes is estimated to be 2520 percent. twenty-three.3 percent globally 2620 percent but now we have a competitive domestic corporate income tax rate we are no means a tax haven. we recently surveyed some us companies we find almost 90 percent of the c corporations responded said the lower corporate tax rate is important to their company. indeed the corporate reduction was the key provision that received the highest importance reading and or survey. furthermore of the companies that said they increased investment in response to the tpa eight many said they did so because of the reduction of the corporate tax rate. there are tax and nontax act as factors that go into decisions but in policy it's very important we endeavor to maintain a competitive corporate tax rate to incentivize economic activities here at home and avoid negative consequences from the pre- era. my second point in addition to competitive tax rates targeted tax incentives are desirable for example r&d tax credit and r&d cost as we just heard. that's vitally important. the latest data from the irs 2014 shows the manufacturing industry claims nearly 60 percent of the research credits claimed by corporations. the academic research consistently finds evidence r&d credit works meaning it increases reacher to development spending and the evidence with the increased spending is greater than the cost but there are some situations maybe there could be strategic reasons to provide targeted incentives on - - incentives registry for example green energy tax incentives. another are tax incentives with the manufacturing of certain goods in the us and in particular the investment tax credit proposed as we have heard from other witnesses the credit of 40 percent in the first year based on academic research of other investment tax credits, we would like to incentivize investment in that activity. however it's important to remain cognizant the system needs to remain competitive for these temporary incentives to be most effective. third and when it was related and looking forward of that already scheduled tax changes to offset those investment incentives for example in terms of changes schedule two oh court on - - scheduled to occur r&d expenditures would be required to be x - - amortized rather than an expense that will weaken the investment incentive on the current tax code with the proposed tax changes president biden's tax plan includes raising corporate tax rate and the resurrection of the amt. forty discuss the risks of the end competitive corporate tax rate that the proposed amt is concerning for several reasons but most importantly for this hearing that policy can offset the targeted tax incentives. they are not present in financial accounting income because that is intended for a different purpose acting as the amt continue no space using the financial accounting income will weaken the investment from the tax code. thank you again for inviting me to participate and i look forward to your question. >> thank you very much. the final witness. >>. >> good morning chairman and ranking member and members of the committee. i was very honored to be introduced by my good friend senator brown. he has spent his career supporting workers in the united states and for us manufacturing. and also the provisions of the current tax law for the off shoring of manufacturing jobs. i appreciated his introduction. as a member of the largest investor union in north america, manufacturing jobs with a local tax base and for these reasons the administration should use all tools available for the domestic supply chain including us tax policy. the committee consider the effects of manufacturing to make sure the domestic manufacturers and the workers are able to make product for the global supply chain. this is a better understanding for the procurement policy the taxes to be used are tedious in a of those facilities they are expensive and expected to last for decades that upfront capital is hard to come by especially during a recession we have had success in taking advantage to ensure members continue in one example is one company in ohio which upgraded its facilities from 2009 with tax credit the members continue to make bearings for world gas mining energy industries. we support the revival and expansion of this tax credit with an emphasis on the community with significant job loss. it is also important we put our tax code into perspective and protect against erosion and ensure that tax revenues allow the government to rebuild infrastructure and invest in workers and provide for our security. meanwhile we need to discourage to low tax jurisdiction and should also to request a bill from critical technology is only successful if really is policy levers to ensure domestic manufacturers to make long-term commitments many examples of these companies and crisis to be undercut by foreign competitors but with these industrial policies that have not successfully created for domestic manufacturers on a large enough scale. for example new energy technology comes from overseas yes companies can make proponents for solar battery technology with both being 100 years old the us manufacturers can and will innovate. as you look at the expansion of new technology, the federal government has a big role to play in the rollout of the supply chain to make sure we retain existing supply-chain. for example those that have provided product while members with the fuel-efficient automobiles. and they should ensure we gain rather than lose the supply-chain. they been a supporter of by america policies and infrastructure as a way to build market and to ensure federal money is spent in support for american workers it only makes sense american workers benefit and that's what is funded from american tax dollars these are broad the popular to ensure that federal spending in the form of tax credits is used to benefit the companies that drive of the economic recovery in america and grow the manufacturing base. in conclusion, well-paid union manufacturing workers are critical to our economy. we can see that evidence that hometowns across the country. thank you for the opportunity to share how important it is to use many tools including tax policy to grow our manufacturing base and look forward to your questions. thank you. >> thank you and thank you to all panel members. i think they'll have a good discussion with the committee. let me start with you. it seems to me you don't grow high skilled high wage jobs by osmosis. the situation here is urgent. if there is more dawdling around we will not see those jobs in oregon and ohio and all the states my colleagues represent. the way we look at it is there is a real jobs creation toolkit to reassure and bolster american manufacturing. what would be the most important step in your view the finance committee could take to shore up american jobs? >> thank you for that question. i believe interview one of the most important things we can do to make sure to create incentives for manufacturers to create jobs here in the country and keep people from moving up sure with the tax policy we currently have. if we don't take action to bolster manufacturing in the us that means more jobs to be in china and not ohio or other parts of the country. >> mr. davis, i went to talk about the shortsightedness of american tax policy because if you look at the recent past congress send out tax policy but it doesn't make it possible for you is a company to have that certainty and predictability that you need to grow jobs in the shortsightedness includes what i consider to be a truly bizarre decision made by my republican friends nearly four years ago decided to put incentives for research and innovation on the chopping block so they could squeeze out the 2017 tax bill through reconciliation. here's my question. i think the last thing we need for intel that employees so many oregonians and other americans in short-term tax policy. our competitors could lap us in that race if we go that route and then we keep reading if we keep throwing the short-term band-aids with the call the sack we are in the worst shape we are in now. would it be fair to say the position you talk about today that chip manufacturers need to have a long-term strategy if we get out of this? >> thank you senator for the question you are spot on and also thank you for your support in oregon. it is a wonderful place to have some interactivity based. both of the issues we talk about both r&d around deductibility and investment tax credit are very important issues for long-term stability and attracting investment. at the need is two.8 percent of gdp today, for every $1 billion, there's about 500 billion of r&d spent in the us today, over 70 percent is from the private sector but every $1 billion equals 17000 jobs. i think american innovation and jobs act is aptly named. we agree changing from deductibility to immature is asian is a very regressive step we would very much discourage also revert 67 years of policy that has allowed the deductibility of r&d and as you know, this is in no small part a major contributor why the us leads in so many areas from technology. we cannot take for granted the impact this would have on both jobs and continuing innovation in the country. with the investment tax credit for semi conductors and other industries as well the investment we have to make in the billions of dollars over many years so having a policy with a long-term investment and is stable so people can have confidence so they make the decision to invest more in critical areas in the us like semi conductors we can count on the same types of incentives that allow foreign competitors to operate. >> thank you one more question quickly. you and other automakers are making a transition to electric vehicles with constructive steps i don't want us to be reliant on china for batteries. and then to think as we shift to the all electric future what can we do to make sure because they will play in are missing important role in the future. >> thank you for the question there are really three key steps we can take the first of which to ensure that we don't incentivize i'm sorry we do not disincentive i.c.e. companies from pursuing this r&d because it is critical by taking away the ability. and those with advanced mobility. and most importantly in this area, how do we also look at those credits that have been identified? >> this is true for companies going through startup and actually need the money now. how can we actually get the cash back credits now at a time when they needed at this point. >> thank you mr. chairman in your testimony the targeted tax credits for strategic industries can be protected. and with a high corporate tax rate to offset is not good policy. can you elaborate on that? and with that inefficient tax that is the most harmful because it discourages job creation and investment. and with that distortionary effect into be detrimental. we ran the experiment the highest tax rate in the world and those outcomes were not good. >> thank you very much. >> mr. davis you noted very effectively how targeted industries specific tax incentives and the dangers we see and made chairman correctly noted they are expiring because of the reconciliation act with the other provisions that were required to meet the requirements of the reconciliation act. there is bipartisan agreement we should not see those expire with what i referenced in my opening statement on a bipartisan basis. can you comment on the notion we are hearing the making of those tax credits permanent with the industry specific basis. and then to be offset by increasing the corporate tax rate. >> and with the success of micron is a no small part to your leadership. and the idea to have the incentive with the outcomes that he went is a concept and we want to ensure we have incentives for r&d in the us to be competitive with r&d anywhere else in the world. and we have, for 67 years we have assured that the way we approach it and it's encouraging to see bipartisan support. in the areas that we talked about before investment tax credits you have seen it is all over the years there hasn't been a stable incentive for manufacturing semi conductors for a very long time and has a significant focus for a number of countries, particularly in asia is a foundational technology for economic expansion and their own national security. since 19 nineties semi conductor manufacturing was 37 percent of the worldwide manufacturing. today it is 12 percent and on a path by 2030 to be a 10 percent. you have seen a massive expansion in asia and china has gone from 1 percent to 15 percent for manufacturing over that same period and they are on a track to be 25 percent in these trends reflect the difference of having a stable long-term incentive to grow capability in the foreign locations with semi conductor expansion as opposed to the us it will be great to have a sustainable strategy. >> thank you very much and you make a strong case with a long-term tax policy. we are running short on time but respond to the notion as we seek to have that stable long-term investment policy and with that tax rates at the same time. >> and with the corporate tax rate as well as rates with the s corp. talking to manufacturers all around the country is that tax reform supercharge the ability to invest in american higher american workers raising wages and benefits. >>. >> thank you very much mr. chairman what i consider an incredibly important hearing unless somebody make something or grow something and that's what we're talking about here is the capacity to make things in america. there is no reason if we have the right policies be cannot do that. it is an area with a very high priority for me. and all the witnesses and their testimony today with michigan's own ford motor company known as their commitment to manufacturing and a big thank you for the incredible work with the medical supply chain with ppe during the pandemic is really extraordinary. the us is a global clean energy country that is in a race right now. $100billion has put in the race for electrification and the investments going on around the world, we already talked today about the capacity of china around with the on ion batteries on - - lithium-ion batteries with the investments they have made in the us supply chain vulnerabilities are happening right now today laid off right now as a result of the semi conductor chip that comes from one plant in taiwan we cannot allow that to continue. and mr. chairman your comments. we have a lot to do together. before asking any questions the 48 c. to embrace the bipartisan effort to reconstitute the 30 percent tax credit for energy manufacturing in the united states we appreciate senator mansion to partner on this and senator daines. where these bipartisan efforts to be invested in us manufacturing of semi conductor components there is just no reason we cannot have the things made in america. i have to put in a plug with electrification we have to pass new legislation to expand and reform the consumer tax credit based on what senator alexander and i did in a bipartisan bill. we have to do that as well. to questions. only accounting 2 percent of the vehicle market today, can you talk about why it is so important to continue to expand the consumer tax credit and how did that work with domestic manufacturing incentives to increase the component parts here in the us? >> it's good to see you specific to the question we know the americans are taking advantage of the tax credit today and in order for us to keep that momentum we have to look at those additional units with the 2019 education that's a key item we need to continue on with that 2 percent you mentioned. and we see that as the one / two punch to enable us to continue on innovation with the investment of infrastructure aligned with other incentives puts us in a position to be more competitive. >> thank you for your leadership and quickly before retirement out to me are a wonderful leader for the steelworkers so grateful for your endorsement the 48 c bill and workers do in america and we need more jobs as you know. good paying jobs. can you speak more about making things in america? with a bipartisan bill make it in america act and then to use our purchasing power can you take just a moment to speak about that quick. >> thank you very much and with that made in america act invested in america and manufacturing creates jobs and allows manufacturers not only to hire more people and whenever they expanded helps the community and supplied six other jobs in the community from what manufacturing was. and from everywhere in this country having the by america provision there is no sector that cannot be touched by that are made better. >> thank you so much. thinking mr. chairman. >>. >> i want to ask one question first we appreciate you holding the hearing it's very important we have strong domestic manufacturing. that's very important for the economy for the national security this was a significant motivation with progrowth tax reforms in 2017 these were designed to encourage business investment in those key features reducing the corporate tax rate at 35 percent because it was the highest in the developed world. for those l.a. to point to the scandinavian economies as a model, the 21 percent is just one percentage point lower in denmark and norway just as important for any manufacturers that operate in pass-through as individual rates were lowered and for qualified business income enacted in the 2017 tax reductions to modernize america's international tax system to bring it more in line with other developed countries. this make us companies more competitive in the worldwide marketplace and incentivize them to grow their businesses here at home that means better jobs and better wages and increase investment. central to the mission to encourage greater investment in the united states this encourages manufacturers to invest in equipment and machines to boost productivity to combine these and other reforms making the us more effective place with the new facility with the goods that they want and as a result in 2018 manufacturers created the most new jobs in over 20 years and in 2019 manufacturing capital expenditures regional time high. to build through the success as a continuation of tax policies so the administration has proposed tax increases on businesses increasing the corporate tax rate to 20 percent, raising taxes on pass-through businesses to raise the individual rates imposing the eight alternative minimum tax doubling the tax rates in foreign subsidiaries but to speed things up i want to refer to something that members of the biden administration have said particularly secretary of treasury by arguing when coupled with other products of the administration economic agenda with investments and infrastructure the proposals will make the economy more productive. in your view is spending on infrastructure a fair substitute in the competitive tax system? >> as a sediment opening statement we have seen enormous investment and job growth with tax reform it is the reason we supported it in for several decades in fact after we achieved in congress passed legislation it's now want us to keep promises to invest in higher in grow wages and benefits we have a document keeping our promises that outlines the great success stories of tax reform. jamison gave their employees bonuses and invested in a new manufacturing space of 50000 square feet and those investing one.5 million a new technology to increase the workforce by 30 percent. 100million-dollar investment those for small manufacturers. and then doing amazing things as well from the midwest manufacturer. prior wages significantly for manufacturers and indiana and ohio a 1 billion-dollar investment from a beverage manufacturer in a southern state. now there are some issues that have to be resolved and those with the research and development side and on the investment interested act abilities side but all in all the work then has led to positive results. >> raising tax rates amazing corporate tax rates 20 percent the combined rate 32 or 33 percent that is the highest corporate tax rate. and then to put us at the competitive disadvantage that many of us on this panel today. >> thank you for holding this important hearing it's interesting having a similar conversation of electric vehicles want to ask mr. jennings as ford and other us manufacturers and then to be competitive with the international competitive market to have this issue in georgia and with the ford 150 program but with that 75 percent threshold without producing those batteries in the united states. so why this 4 percent is not enough to get the batteries built their? what does it mean for your ability for production in the united states? >> and specifically in reference to the four years that was referenced batteries are the fundamental foundation and with those battery cells and battery packs take approximately four years of additionally the building of a new electric vehicle facility also takes about four years. and with that battery cell and battery pack and with those in the available that there is capacity currently available we now have to resort looking at foreign suppliers to import is not compliant to usmc that's why we feel with us footprint. >> but we have to get this dispute resolved is what it comes down to. >> to that point we have consistently stated we encourage the korean government to work with these two companies to resolve this even prior to come to an amicable agreement. >> another transportation sector the aviation sector with those jobs lost tens of thousands because of the covid pandemic and the decline for yet we see those see the number on aviation or transportation what we need to do to keep that supply chain in the united states? >> i would say senator one thing we need to do that we get to travel and hospitality industry up and running again overall to make sure we will receive went fairly soon with the red and yellow ribbon to encourage vaccines throughout our country we are very proud to be leading that efforts. also that tax incentives with workforce training and development is part of the onshore plan i reference to my opening statements. and those that will help to prove the workforce also most notably that's promoted by the private sector. and boeing and the work that they do to support community colleges and technical schools where they actually have on the ground training and then support the types of programs through appropriate tax incentives. >> and just one last thing on the supply chain what do we need to do on the material side for the shortage we are seeing? in the energy committee for actual recycling of materials with the immediate supply efforts. >> what we have seen this year is a remarkable demand and automotive is one of the impacted with a large decrease in demand followed by a strong ramp up also in the semi conductor industry a very large expansion the way they interact with each other with the semi conductor and those substrates and wi-fi elements. and with that expansion and supply chain to support semi conductors. one of the things we read 12 percent manufacturing in the us semi conductors aerospace it's 50 percent so we are highly dependent on foreign suppliers and in taiwan from those shortages as well so the expansion of the supply chain and manufacturing in the us and that was a positive step in that regard. >> we are deftly proud of that and we want us manufacturers to have supply and material. >> thank you mr. chairman let me start by saying tax reform double the child tax credit also lowers tax rates across the board the lower corporate tax rate up to january was the highest rate in the developed world and as a result with a pandemic the economy was on solid footing and improving the business environment for us manufacturers those with a lower business rate and with more capital acquisition in the and those when it comes to jobs and wages and benefits and second to help us manufacturers better compete against global counterparts. >> i went first last time i yield the floor. >> tech reform clearly was an improvement in clearly made manufacturers more competitive providing incentives but it did help create incentives for manufacturing here there are things we could do what we need to give manufacturers uncertainty that they will stay in place if we can give them certainty something like that would stay in place that would help to strengthen the incentives going forward. >> i went echo that sentiment as well. i can give you a couple of examples where manufacturers that have brought production back to the united states they will production jobs from malaysia to the united states but they are based in kentucky the washroom equipment with the north american and product lines moved to jacksonville tennessee that are just a couple of examples but those examples of investments small medium and larger manufacturers have made sense that took effect resulted in billions of dollars of investment of equipment here in the united states hiring american workers raising wages and benefits but what was mentioned as extraordinarily important businesses and manufacturers need predictability and stability in the tax code. we would ask this committee and your colleagues to recognize that fact. quite honestly increasing the tax burden regardless of the objective would harm the ability to grow and compete in the modern economy. we do have some issues to address. those we talk about today can make even more competitive but your question senator those reforms were very important to supercharging investment and job creation here in the united states. >> if you look in the early days at the be in the 20th century was 2 percent to produce more than the 40 percent the same things happen with american manufacturing so the labor force has been on the client since then. what that means obviously is united states manufacturing activities are more specialized in high-tech to transform the nature of work in manufacturing. . . . . that e not in improvements made. we are excited about this though and want to make sure the research and development costs remain. we believe there needs to be a broad-based investment tax credit. we are talking about some here today as well but our strengthening the manufacturing supply chain proposals we callel for a broad-based investment tax credit as i mentioned in an earlier question senator cantwell proposed, incentives to help companies recruit, train and maintain skilled workers in order to help build a pipeline of workers with the skills needed for a manufacturing facility it's hard to believe that there's pandemic but they have 515,000 open jobs that we cannot fill because we can't find folks with the skills necessary my home state has been at the forefront of innovation we manufacture more than $52 million with of products a year and support 247,000 jobs with an average pay of 92,001 thing i've been looking about is what role congress can play fostering the generation of advanced manufacturing to assure the jobs of the future are created here in the united states and i believe we need to invest in our university system and develop public-private partnerships between the universities and the private sector. i'm looking forward to working with my republican colleagues on the committee to draft legislation that would establish centers of excellence to incubate advanced manufacturing processes that would enable us to outcompete china and the rest of the world. so, can you speak to the importance of leveraging our research university systems to foster advanced manufacturing in order to be competitive in the years ahead? >> thank you very much for that question, senator. you are absolutely correct if you think in terms of the work that we can achieve at our four-year institutions and i would say that i have seen some amazing work being done at other schools as well. you have that hand in glove with the research tax credit and with the ability to deduct on an annual basis you continue to strengthen our capabilities as the leading innovator, innovative nation in the world and innovation is frankly the lifeblood of manufacturing. you've already heard some statistics coming from mr. davis and others about how incredibly the research and development truly is the lifeblood of our economy and we lead the world. we want to continue to develop our footprint and we can do that through partnerships with institutions of higher education. >> hearing the number of jobs that you say exist and are going unfulfilled that in addition to the kind of training programs you are talking about, we should be marrying our community college and other institutions to look at the skill sets that are needed in this regard in order to fulfill. >> yes sir. >> me turn to the shortages of personal protective equipment that persisted throughout much of the last year that revealed the vulnerability of the medical supply chain. states were forced into wars against each other and chaos ensued. there were healthcare workers risking their lives day in and day out to use the same shift after shift. life-saving drugs and ventilators had to be rationed creating an impossible choice between hospitals, long-term care facilities and nursing homes, and so i believe we can never be held again hostage to foreign manufacturers. i understand in a global supply chain, but for such critical medical supplies, i think that there's a better way, so i have developed bipartisan legislation with senator wicker to incentivize medical supplies manufacturing which is part of the united states and commonwealth. our legislation will provide u.s. with a credit on the amount of manufacturing job creation they undertaken the territory which wouldn't be a giveaway, rather tired directly to the wages and tangible investments in the territories. can you speak to how the laws of domestic pharmaceutical manufacturing capacities created supply chain vulnerabilities that the pandemic exposed? >> yes, thank you, senator menendez. actually, we are losing a pharmaceutical manufacturer we've represented that is going out of a thousand jobs lost. we struggled with personal protective equipment all over the state of ohio and all over this country for our members during the pandemic and i believe that is critically important to get that supply chain back to make sure that whenever we need protective equipment that our workers and members can get the supplies. it's very important to our economy to make sure that we have a supply chain for domestic pharmaceuticals and protective equipment suppliers. >> thank you, senator menendez. senator portman. >> appreciate you holding the hearing. it's very timely and i think you for providing so many to join us. jay timmons, jonathan jennings thank you for being here, and donnie i appreciate your being on today and appreciate working with you and your team and all of your locals including some good successes with cooper tire and [inaudible] saved a bunch of jobs and some recent legislation on america because you are right that is an opportunity and the level of playing field and the new bill we are working on. this is a really important issue and i want to back up for a second and talk about how to ensure we can be competitive. there's been good discussion about the tax law, but i think that there is a new emerging consensus we need to think about competitiveness in terms of what is called the industrial comment where you've got manufacturers, suppliers, inventors and skilled workers kind of altogether and although as a republican i'm always hesitant to talk about government may be too involved in the market, which is ultimately the very successful making us a strong economy a lot of people envy and then we've got to realize those kind of comments really together doesn't matter. ohio and michigan in the auto industry or think of boston in terms of the pharmaceutical industry, here is an interesting statistic. u.s. r&d expenditures in china have grown 13.6% annually on average since 2003. in the united states it's been just 5%. so, what that means is manufacturing going out of china would have been, the r&d starts to go over so this is all connected, and i guess i just would ask my three ohioans about this notion of keeping the ohio manufacturing skills as was said and i agree with senator menendez on the skilled workers that is a major part of this but you agree my ohio friends here that our manufacturing industry workers are better off with a healthy industrial network and skilled workers. >> this ohioan does agree. >> all roads lead to ohio and thank you for that question and i will also say, senator, the chair man mentioned that our goal should be to outcompete china when it comes to research and development. i could not agree more and i think that this is incredibly important and an incredibly important topic. >> thank you for that, and i appreciate your comment on that, i couldn't agree more with what you said in that then you and [inaudible] >> jonathan, thoughts? >> from student phil is certainly aligned with the comments and it's not only for the workers, the consumers and for america. at the end of the day, we need to make it healthy. to your point, this is one of the ways to get there. >> let me ask a specific question. we talk about the importance of the investment and jobs and i could not agree more with that. with regards to the amortization we had a good discussion and that's a big mistake and kind of a detrimental impact on the innovation of course. and so we've got to be sure that the domestic or entity, not amortizing over five years but being able to fully stay in the law and i'm not going to ask that question because you all seem to agree that there is another one that is similar and that is the deduction of interest under 163 the legislation limited the business interest based on income and the amortization but at the end of the year the depreciation moved from further limiting the deduction. you know about this. it's interesting because right now it's taken on debt, so you get things even more difficult than the pandemic, increases in taxes by eliminating the deductibility of interest. can you comment on that briefly? >> i will start. you are right. the limitation in this section 63j when it's supposed to move to the limitation will become more binding meaning that it will be limited in the interest deduction. the important thing about this is the limitation can be more binding just by making another assessment, not by taking on more debt so it isn't added back to the calculation and that makes the interest deduction limitation more binding and again that could happen with those equity finance investments so i think you are exactly right. >> i think you are correct as well, senator. we are a highly capital-intensive industry part of the economy and there are times when we need to borrow so we can invest in new plans and equipment and ensure that or base that on what our expectations are for future success. increasing the costs of anything as it relates to doing business here in the united states does harm our ability to compete and succeed in the global economy. >> we have 16 senators to go. >> thank you mr. senator, appreciate it. >> thank you to the witnesses, welcome, good to see everybody. we passed legislation last year and i just want to thank you. the greatest challenges we face is climate change, too much carbon in the air and one piece of legislation that's worth a huge advance that would never happen without the support and i just want to say thank you. about 28% but the biggest one of all is the mission from the mobile sources. i want to support the leadership that you are providing to join together in reducing the global emissions from the sources in the coming year. in joining us, senator alexander extending a question for mr. jennings. again, we enforce the investment tax securing america's clean fuel infrastructure act and mr. jennings legislation would incentivize companies to make investments today with clean infrastructure nationwide. it's one thing for the bill and it's another thing for people to buy them and the ability to charges another. can you talk about the importance to the tax code like the clean infrastructure act encouraging domestic manufacturing zero emission vehicles and what we should be doing to leverage the tax code and encourage the innovation in this space. thank you. >> thank you for the question. an absolutely fully aligned the climate changes impact us all and i appreciate the comments being fully aligned with the paris accord and the more stringent standards in california. it is critical for us to continue on and have those tax incentives to give us the opportunity to do this to ensure we are continuing on the strategy to be able to be carbon neutral by the year 2050, so that is one of the key areas and along with the other incentives to put us on that path to achieve that. >> i was struck by the witnesses and excellent panel but there's a lot of interest in not raising the taxes and revenues and we are looking at the dead. i'm a recovering state treasurer from delaware. we spent money the last administration and this administration and it reminds me [inaudible] i've seen sailors spend money and [inaudible] the senator of louisiana i think would say don't tax you, don't tax me, tax that follow behind the tree. nobody wants to pay more taxes but i just would remind us all about a month ago the general accountability office came out with this every two years a high risk. one of the things they call for again is making sure we go after the tax cap, money that is owed to the treasury and we are not collecting it and the folks at the irs have asked us to be responsive for the money that we provide for every dollar i forget what it is that something like every $30 we provide for the revenues and to protect they collect something like five or 6,000 in revenues. while nobody wants to pay more taxes, when we pay our fair share and we have other folks and other businesses that are not i would ask us to keep that in mind. last i probably don't have the time to ask this but i will for the record. i would ask you all for the record to let me know what does this panel agree with respect to taxes and to strengthen and enhance the domestic manufacturing in this country, where do you agree? [inaudible] i will stop with that. thank you. >> thank you, senator carper. fifteen senators to go. senator langford. >> thank you. i will jump right into this. obviously issues going forward over the supply chain, we talk about manufacturing [inaudible] on the supply chain in the days ahead, so whether it's steel, producing automobiles, whether it is producing medical equipment, whether it's energy production, supply chain matters on this, critical minerals, occasionally complex issues from the congo and such so one of the questions i have is multiple of the minerals that are here. when you start dealing with supply chain issues and i can bring this up to mr. jennings because i know with this vehicle you have a lot heading towards an electric vehicle what can we do in the tax code that you see at this point to attract some of those suppliers to be able to come to the united states for the barriers that are pushing some of that development outside of the united states and the vehicle production here with a lot of the manufacturers and supply issues. >> i appreciate the question. you were spot on the reference not only to the overall vehicle assembly but as you get further than the chain, the raw materials to make sure we are able to get those back to suppliers making the tax code more incentivize for them to come here because the truth is that vertical integration where it isn't just the vehicle itself but all the way through the value chain. >> is there anything in particular right now that is a detriment to coming back to the disincentive to bring some of that manufacturing supply chain here? [inaudible] you will have to talk louder. >> that was my fault. we need to contain the current competitive tax rate to ensure we do not step back because we know that there are other nations that are competitive in that space and speaking with our suppliers because of that competitiveness they are looking elsewhere outside of the u.s. so we need to maintain that to ensure that we maintain here in the u.s. >> let me ask you that same question as well, things that you see may be challenging in the tax code to bring some of the suppliers to bring those back to the united states to increase the vulnerability and mineral production and some are facing supplies and also ongoing conversation about the tariffs as well which is basically a tax issue if you would like to make a comment about that. some say miraculously they would come back. we haven't seen that to be completely true and with the taxpayers they are coming back. >> thank you, senator. i think mr. jennings really hit the point on the tax code. let me offer one other perspective and that is permitting reform so some of those critical minerals that you are talking about, running into issues when it comes to prompting the permitting sometimes it takes three or four years to get the permits in line to do what we need to do to extract those. as far as the tariffs go, they distort obviously the cost of goods and services. at some point though, there have been some rationale for certain tariffs that have been applied to attempt to level the playing field against countries like china. we, what we need to -- what we need to avoid, senator, is imposing the tariffs that would end up causing retaliatory tariffs on our goods leaving the united states. it makes us less competitive and less desirable around the world. we want to be able to reach the 95% of customers that live outside of the united states. we need competitive economic policies here at home to grow domestic manufacturing, and we need trade agreements that are enforceable that enable us to reach other markets. >> the senator brought up the provision because we have changes that are coming on that soon. what effect does that have the suppliers wanting to be able to come to the united states to see things like that change, it is a pretty dramatic change at this point. does that encourage or discourage investment coming back to the united states on these tax policies? >> are you addressing that to me, senator? >> yes sir. >> the change that is coming into effect if we don't do something about it, if congress doesn't do something about it would discourage investment in manufacturing and make it more expensive obviously to borrow money, so we are pleased to see the legislation is being considered before you all. >> we are as well. hopefully we will be able to get that done. mr. chairman, thank you. >> we can't hear you. >> senator cardin. >> let me thank the witnesses. this has been an incredible panel. thank you mr. chairman for conducting the hearing. manufacturing is important to maryland and the nation and we have over 4100 companies that over 112,000 jobs and in the auto industry we have over 1500 people, so this hearing is very important and i was going to be supportive of the changes on the tax code to make domestic manufacturing more competitive, whether it is to deal with innovation and research development, those provisions or whether it is industry specific. but i just want to make one observation. you talk about having the competitive tax structure and it is virtually impossible for us to have that if we do not harmonize with the rest of the world. what, i mean, by that is we raise most of the revenue from income tax, not for consumption tax which is what the rest of the world does and consumption tax is border adjusted making u.s. manufacturers at a distinct disadvantage. we talked about having predictability but to be reasonable about this, it's been changed so many times over the last couple of decades and don't we expect whatever changes were made we changed again. so i just want to put on the table that we should be talking about how we can take advantage of the reliance on governmental services and have not only competitive but low tax rates compared to the global community and that means harmonizing and having the progressive tax here in the united states and as the chair man knows and the ranking member knows i put that on the table and i will continue to raise that issue because i think that is the way we could have the most competitive tax code from the point of view of the issues we talked about today. a second point i want to make and i want to go to the administrator of the small business administration. i hope as we talk about how we can solve the domestic manufacturing you recognize there are special needs for the smaller companies which is where a lot of the job growth takes place and innovation takes place and we need to make sure that we do focus on the needs of the smaller companies, smaller manufacturing companies as we look at the changes in our tax code. with that, mr. chairman, i will yield back my time and go to the floor to speak and give you two extra minutes. >> thank you, senator cardin. senator young. >> senator young. >> we do not have senator young. then we have senator brown. >> senator casey. >> mr. charan? >> there is a senator casey. >> mr. chair man, thank you very much. i want to thank you for this opportunity. let me turn my volume appear. and thank the witnesses. i just have maybe two questions for one witness and i will may be submissive others for the record, but i want to start with a question for donny. i appreciate his work with of the steel workers who obviously have a big presence in my home state of pennsylvania, and i know they care deeply about manufacturing jobs that we hope to create and we've suffered through so much loss. looking at some of the members, by one estimate, pennsylvania between january of zero five to january of this year, we've lost over 147,000 manufacturing jobs, and that is on top of the several hundred thousand jobs we lost in the two or three decades before that. so i wanted to ask about first of all in your testimony you discuss the power of federal procurement in the way that can be used to support american manufacturing. and i'm also glad to see the administration is focusing on supply chain security and i'm revisiting rules around those complex loopholes including the week rules of origin. legislation to establish the supplemental rules of origin for the nonmarket economies like china. this will close a backdoor into our trade agreements and also government procurement for goods that are now produced under competitive market conditions. so i would ask can you discuss what a measure like that could mean for workers and particularly steelworkers. >> absolutely, senator. thank you for the question. look, we have dealt with trade agreements and the organization has probably more than anyone else. i, our organization believes these agreements should reflect our values and we should make sure that they do not have these back doors that they get into and steal our jobs out of this country. you know, the by america provisions that we have again, it creates jobs here in this country and that's what we are all about. we want to create as many jobs as we can, get the manufacturing sector back up to where it should be and as we do this it will strengthen our communities and strengthen workers to make sure that families are taken care of. .. >> communities impacted by trade or industry transition or huge job loss. i know there are communities that fit that description in ohio, plenty in pennsylvania over my lifetime the last 25 years. this provides direct support for the economic plan to implement support for workers and small businesses. one proposal focuses on regions suffering those job loss but the payback act that would direct the revenue from anti- dumping count i - - countervailing activities so can you comment on those proposals? >> i appreciate that. if you look in the area of southeast ohio in pittsburgh steel employee about 3000 people in the corporation i came out of 2250 people when i hired in 1979 and that plant was consolidated aluminum plant was 1700 people. >> just talking about that one area within 50 miles of each other so that was a big boost to that region and any others that you have that need that help what we ought to be doing for workers and communities say this is the first hearing have ever been ahead of senator brown. [laughter] >> thank you mr. chairman for holding this hearing and i appreciate the fact that both you and senator crapo have already raised the issue of critical supply chains for advanced technology like semi conductors. if we talked about government investment in this category not too long ago it would sound like industrial policy that was a bad name for bad work but we have to understand we have to use the tax code and in certain places direct government investment to be competitive. in 1879 the us government had $4 billion in a new area called gps that revolutionized how our economy works that would be equivalent $15 billion today. i think if we think areas where america needs to lead the semi conductor industry america is a clear example and unfortunately we have see americans share 47 percent in 1990 projected to be 9 percent by 2030 in the meantime for about 12 percent or 30 percent is expected in 2030 those sitting on the intel committee looking at $150 billion plus so there is legislation included in the nda aa with a number of members of the committee have been supportive of but i want to ask this all of the above tax incentives and investment in semi conductors how is that to maintain america's position in the global challenges around semi conductors? to paraphrase your logo virtually everything that happens in manufacturing and technology development. >> thank you senator warner for your leadership as well. thank you pointed out the statistic the policy activity driving the shift in the us competitiveness for tracking semi conductor manufacturing and investment overall. if you look at china or taiwan or south korea all the areas of substantial growth in the percent taking place it's with a coordinated set of policies to induce investment in those countries in some ways it is a policy of those countries that semi conductors is so fundamental to the national security and economic base, they will do things beyond normal tax policy. and really the us is not taking that position. so you can point to the success of others as a way taking a more direct focus on everything from the grants discussed over time and invent on - - the tax credit which is a direct response to what is happening in the rest of the world. >> i think we can work on this glad we got it from the nda. this is a subject we've talked about for a long time i think if we look back over the last year with this administration to step up and deal with covid the only challenge we still have $5 trillion not near enough on workforce retraining i think a number of the jobs we have lost are not coming back i would like a comment on this i think we need to create the equivalent of an r&d tax credit to increase the quality of the workforce to alleviate the challenge we have right now spending $5000 on a robot with the r&d tax credit you can put on the balance sheet if a private company can reported with the investment for workers to be more efficient and with the robots you don't get that tax accounting. >> hardly make sure we and sent companies to make that investment in the workforce. >> we have just a couple of seconds we been working on this thank you for the question. so just a brief synopsis a tax credit in this area can play an important role to train the workforce of tomorrow we made recommendations last year on the supply chain. we know high-quality models are essential to staff manufacturing facilities efficiently to defray the cost associated with the programs and to be put in place but at items like the initial setup cost for trainers and those with those types of programs and second, employees should not be penalized for investments. there is guidance right now from the irs that allows only $5200 for educational assistance to an employee to be excluded from the gross income that should be double. >> and very interested in the subject we have to move on. >> thank you chairman and ranking member for holding this hearing also thank you to the five witnesses for lending their time and expertise to the whole committee today. we are looking forward to building a post covid economy and strengthening or supercharging manufacturing sector it's critical as we think about this we identify as many ways as possible to increase investment with research and development in this country. to that end, yesterday we introduced a piece of legislation american innovation and job act to expand the r&d tax credit for innovative startups to ensure companies can continue to expense r&d cost in the year in which they occur. thank you to senators portman and sasse cortez master for joining to advance this important bill. mr. chairman i like to request them is consent in the hearing record a letter of support for mr. steve ferguson who is ceo medical device manufacturer in bloomington indiana and from mike man study. >> without objection so ordered. >> thank you. >> mr. jennings, since 1954 companies have been able to deduct r&d expenditures as they occur but beginning in 2022 is as mentioned earlier companies will be required to spread out deductions over a number of years rather than deducting in the current year. united states doesn't reserve immediate expensing it's only one of two countries in the industrialized world, the other belgium to require the amortization of r&d expenses we have to ensure the next generation of cars and computers and devices and other cutting-edge technologies are developed and produced here in the united states. mr. jennings, if companies are unable to expense r&d cost in the year occurred how to set of facts forward ability to invest in tomorrow's technologies? >> sorry i was double muted. [laughter] >> i appreciate your leadership in this space. it would specifically affect forward for example we spent $5 billion in the past year and the ability for us to deduct those expenses prioritize going forward so it's critical we can continue to deduct that because of are not in a position without r&d it puts us in a noncompetitive position. >> since you're in a noncompetitive position globally i presume that means your inability to immediately deduct these expenditures come at the expense of manufacturing jobs here in the united states and throughout your broader supply-chain? >> absolutely. a total of $5 billion and that has substantial impact to our business so it's critical for us to continue to deduct those expenses. >> mr. davison the 21st century the us share of global r&d investment has fallen dramatically from 39 percent to 29 percent. meanwhile we continue to face stiff competition from countries like china that has aggressively focused on growing its r&d sector and by some estimates will surpass american r&d investment by the end of this decade. in your testimony rightly point out the danger of the anemic invested r&d sector not just for economic loss but is a genuine national security risk. if we fail to take our competitors seriously my question or ability to be a leader in this regard. so what signal give companies that are planning their investments over the next two years speak to that issue? >> when it comes to tax policy competitiveness cannot be overstated. if we don't go back to deductibility from a competitive standpoint with the rest of the world with our competitors overseas a gift to compete more effectively in one of the reasons there is great bipartisan support that just makes no sense. >> as the leader of intel to polish this legislation. with the american innovation jobs act that hoosier companies the auto assemblers to see shortages of semi conductors would have sufficient and steady access to these important components in the future saving jobs for other americans. thank you so much mr. chairman. >> thank you very much chairman. going back to mr. timmons. the national association of manufacturers identified the worst of structure of climate action in america. i doubt that was your favorite day i'm prepared to concede the chamber of commerce earned that distinction that you were in a virtual time with the chamber. but my question is what is the national association of manufacturers position on climate legislation in congress today? >>. >> this is not an unexpected question. we've had these questions before. i have not actually seen that study that you cite. as you and i have discussed before, manufacturers are very committed to the cause of climate change and to the carbonate using our environment. we share this with you, the promise ahead which is taking action on climate change. we've made great strides to reduce omissions we have done so often times in spite of policy we have spent far too long to push blame over climate change and too little time working on solutions. that's why we do call for action with this plan is all about. >> first of all do you see a way forward with the climate crisis to avert pandemonium without congress stepping in some significant way? >> i think we need a global solution that is binding. and we talked about this before as well that the foundation of the us response to climate change to prevent carbon leakage and that is where we need to go. >> then congress needs to enforce bylaw? >> now we've gotten through the predicates to the punchline with that significant climate legislation what are the key attributes that legislation shed have to protect and expand domestic manufacturing? >> as i said in these to be enforceable. we cannot do this alone. we need to enforce actions of our trading partners. also, we have environmental goods with europe to see that enacted and today's hearing has to do with tax policy to incentivize our ability to do the things we talked about but to take on new technology the r&d tax credit for instance is key to helping us create new technologies to help us not only clean the air and water to the carbonized environment. we know we want the world ahead. manufactures are key. and to make a lot of progress in the last few years tax policy and enforceable trade agreements also enforceable climate agreements are critical to our ability to do that. >> with enforceable trade agreements together, one of the things i often hear is if you don't have the capacity to apply border adjustments and other countries not in step with climate strategy, you could have leakage of jobs with a very artificial reason they put them out with climate strategy. >> and were happy to sit down to talk to you and your colleagues about any proposals to incentivize manufacturing in the united states to meet the goals that we share. >> you can see border leakages a problem? >> my time is out and i yelled back thank you for your conversation. >> i think my colleagues. senator i have to go vote. why do you ask your questions when senator crapo comes back he will chair until i can get back so we will recognize you. >> i greatly appreciate that. and i and grateful for your testimony. as you've heard from senator young and others so i introduced was senators cortez master to strengthen research and the for domestic manufacturers and innovative startups to expand the r&d tax credit by doubling the cap and also to strengthen vital r&d to the manufacturing sector by reserving full r&d write-offs together these provisions will help secure supply-chain boost economic recovery from covid-19 and increase competitiveness with china in your testimony the importance of the bipartisan of domestic manufacturers can you elaborate to secure manufacturing supply-chain? >> thank you senator i can and thank you so much and during this critical piece of legislation those cosponsors you mentioned as well. research and development is the lifeblood of manufacturing and the majority heard today formulate two thirds of all private sector there is years global competition right now the united states is frankly behind the world with research and development tax incentives. i worry temperature is asian. and to allow that to occur would only be the countries requiring amortization. it's a bit of a country but we do want to be in the same economic class for same economic policies as belgium. and amortization would reduce r&d spending by four or $10 billion per year. so each billion dollars of research and development investment lost could cost 14000 jobs in united states. we need to get back on track and the amortization clause. the bill will help to ensure the tax code ensures innovation and helping america be a competitive location for on shoring. we appreciate the fact it is bipartisan working with members on both sides to advance this bill. >>. >> with the importance of the r&d tax system with the production of semi conductors the testimony discusses semi conductor manufacturing. can you explain how these incentives promote on semi conductors? >> thank you for your leadership and for the bill that you put forth it is so critical to avoid regressing on r&d. to be a true leader and the rest of the world is investing more over time. leadership reflecting the 67 years of treatment and with that deductibility leaving - - leading to a positive outcome and what anyone would want to be seen as the world standard to the most regressive and i thank you for your support. >> mr. jennings, and explain the r&d tax incentives of the bipartisan bill? >> senator we appreciate your leadership in the space percent and the young. and in reference to r&d research and to have an immediate deduction. >> and i do see senator crapo. thank you to all of the witnesses for your testimony. >> thank you for the conversation it is been very light and. going on just to incentivize manufacturing and with those let them buying that is occurring. and then we all know with the technology. >> and what strategy can we forge to be available to talk about tax credits rather things. so any thoughts about that quick. >> we looked at that. and with the vehicles because that is how we remain competitive. so that was called the tier one handle to that value chain to ensure we are competitive. >> i agree with jonathan's point. >> that conversation is crucial to bring back the manufacturing. and with that incentive to appreciate the conversation. and so happy was senators and colleagues here. and with the leading research like dragonfly a energy. and those to the american jobs act but what else should we be exploring and with entrepreneurs and their others they are? >> thank you for your related leadership and there are small and medium-sized manufacturers and they also innovate on new solutions for aircraft and other products like that. and any focus with those rates more competitive small and medium-sized manufacturers are many disadvantages not the least of which which is the outsized burden with the cost of compliance regulations almost twice as much. and with the less competitive tax code. as you well know and i welcome having a conversation about that in the future. that is where the job creation is the most energizing and robust in this country. and then to incentivize to do exactly that and invest more in the country. >>. >> thank you very much. up next is senator daines. >> senator mansion and senators stabbing out introduced bipartisan bill and that is a modified version to attract clean energy manufacturing with high unemployment and in places of coal mining or coal power plants have closed. a powerful tool to help create jobs in montana as well as throughout the country to ensure the workers continue to play a big part as they should american energy production also section 48 c interact with several tax cuts in job act provisions set to expire this year of no further action is taken. professor i do expect a targeted provision like section 48 c to interact with r&d expensing and introspective ability and a failure to extend these provisions against a very positive effect. >> thank you for the question you are exactly right the provisions like r&d expensing with the limitation so you'd be giving on one hand and take away the benefits we will be providing so it is proposed by the biden administration because financial accounting when not have that incentive and then to work against the credit. >> in your testimony you mentioned businesses across the country have the reduction in tax rates enacted as part of the tax cuts. that sparks new investment by businesses to increase wages with the tax cut in jobs act with a 20 percent reduction looking at my home state of montana 99 percent of businesses are small business with that debate back in 17 a lot of job creation is with a rates for both we have to keep her i out and certainly with the pass-throughs the bills recently introduced would make the tax deduction permanent which i believe we give businesses to continue investing so when it be better for congress to act better to make the deduction permanent before expiring in 2025 with that very important deduction. >> and it relates to their previous discussion with the small and medium manufacturers in this country 90 percent are small and medium-size enterprises so we see obviously the tax code is very consequential to small and medium-size enterprises we need to take that issue on now as the businesses try to figure out exactly what to do in the future when it comes to expanding operations to hire more workers they need to plan ahead. this can be something that happens at the last minute. >> you specifically ask, i would like to see more generous tax policy quite honestly because they do power the economy talk about the results of tax reform 263,000 manufacturing jobs were created in 2018 it was the best job growth in over two decades the fastest growth of wages of 3 percent tax reform as well we have seen a lot of investment because of those tax policies and we see in the data and anecdotally the montana chamber of commerce state affiliate talk about this a lot, it is anecdotally what you hear from manufacturers all around the country how they feel empowered and supercharged even during the pandemic when everything should have gone south and much did clearly, but manufacturing could weather the storm because of those competitive policies in place. >> i think amount of time. >> that is correct. >>. >> i'm grateful to have this hearing but first a like to make a concession from the economic standpoint the low-cost providers was a good idea the matter where the manufacturing occurred i have reevaluated my a opinion the vulnerability of the supply chain in general and many of us have mentioned the importance of the competition with china 5g semi conductors quantum computing or you name it so some sort of industrial policy consideration and the question i have for each of the witnesses if you had to choose between the annual appropriations process and a refundable tax credit that senator warner and i have proposed that would you choose with their predictability and usefulness? >>. >> thank you for your leadership the annual appropriations is difficult for those who make large investments in have to make decisions and that environment. moving away from annual going back to predictable and competitive competing with asia for investment. much more intent on the chips act. >> do you have a view on that? >> certainly. i agree completely the annual decision does not make for predictability or stability and we need that to compete and succeed in the global economy. i will say this. you can have both i represent manufacturers in america i want everything made in the united states and went american workers to benefit. we know that's not possible every time we have to do what we can to attract job creation here so you can do that and low-cost products being made as long as we have the right policies in place what this hearing is all about today and i completely agree with your statement in support that legislation and how we can see that enacted. >> thank you. the one thing the virus has taught us is vulnerability of supply chain with ppe. obviously semi conductors as we think about building one for having one built and arizona this is critical but not the only critical one so those that contribute to are thinking how we prioritize the manufacturing with national security implications thank you for being here and thank you for your testimony. thinking mr. chairman. >> our senators back yet? let me check. [roll call] >> i have a couple of questions i didn't get to waiting for them to come back i will gone with a line of questioning i started out with. many of you capably pointed out the importance of protecting tax credits for research and development and having a stable system with the annual process for some of the tax credits. and the reports for the white house for the proposal for tax policy to increase the broad-based that we have in the tc jj from 35 percent to 21 percent which still left us looking at the averages pointed out still left us with one of the higher tax rates but still competitive in the middle of the pack with the global competitors. the chairman is back so i will just ask if you can each quickly respond to the concern that i have so with that needed stability if the r&d investment with a corporate tax rate. >> they work against each other. giving with the one hand and taking with another the r&d tax credit it is moving to take away to make us uncompetitive with the rest of the world. with the corporate tax rate and then with the ability for r&d. >> i probably have more of unique view of r&d. and as and organization the first part of r&d to make sure we stay competitive then i'm sure to make sure we keep that to do research and development to lower the workforce than i would have a different view of that. and then take people out of the economy. >> mr. chairman. >> mr. chairman i'm ready to turn it back to you. >> thank you mr. brown is next in line. and understandably so. just like old times calling on me anyone workers saw their jobs outsourced to china and then the ge refused now those workers at face tough conversations at the kitchen table how their family survived and what they do next. and then to make the glass for the assembly lines. so briefly what happens to us workers like that move overseas? >> thank you senator brown we see a lot of that and in this particular instance we actually got done with the contract with a company in ohio but now because they make the glass casings but now what will they do with the is glass casings but also puts pressure on the workers. and then to wonder of jobs to be available for workers now or in the future. then to put all kinds of pressure on all kinds of people that would be on that facility as well. >> we will continue to talk to in the two communities about it. so to talk to a fellow ohio and, what steps can we as policymakers? >>. >> and it's always good to be with ohioans. and one that we addressed in our proposal to strengthen and manufacturing supply chains it applies to existing facilities that are here as well to make sure we have a tax credit to encourage manufacturing investment, support for workforce training programs , we are very happy to hear him talk about and ensure we are not only training but retraining and future proofing jobs. we've already talked about ensuring the tax code supports research and development protecting interest deductibility and an annual report on american competitiveness. there's been some discussion today of industrial policy and we have waited that term. i'm not afraid of that term. it doesn't bother me because everything we do should be directed at strengthening manufacturing and increasing manufacturing jobs here in the united states but including infrastructure investment can help us do exactly that. >> and one case today to turn on the local news about another corporation and then making the 2018 commitment and the investment they promised create within 1500 jobs now they decided not to honor the promise and then do next generation vehicle. in northeast ohio the decision to turn its back on the community is unacceptable. give your thoughts about that. and those of any other automaker. so to how the assembly plant investing $185 million to create hundred new jobs and we are invested at that facility. and with the super duty perspective so we will continue to invest in support that particular facility. >> but that commitment is no longer? >> we are continuing to work and invest in with those programs working on outside. i am hopeful that your company will step up and do the right thing this is not the last time you'll hear from us and i'm hopeful we can find a way i know that kind of investment and that young styles to create huge numbers of goods. >> senators sasse will closed. senator crapo do you know the whereabouts of senators kennedy? you are on mute. >> my understanding senators sasse cannot make it back so i'm assuming the same we can wrap up. >> i will wrap up with a quick statement. i want you to know when i am taking away from this because it has been a very productive session. because to me the take away is urgent business for elected officials to create the conditions for a homegrown semi conductor industry that implies high skill high wage workers for a decade. not just a year. that is my take away i want to humans chair of this committee come i have seen too many short-term policy mistakes. when your voted against the package because i said i will not support anything with the shelflife shorter than a carton of eggs we had one short-term policy after another one fiscal cliff after another. and what you walking out of here to know i intend to support senator cooper in all of the colleagues and with that homegrown industry to outcompete china. out competing china. so thank you to all of our guests or witnesses we have very high turnouts along members i guess the hearing is wrapping up but to be continued. with the research and development cannot afford to wait. every single day is a mistake. to be continued. thank you everybody. >> thank you

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